Equity Accounting


DEFINITION of 'Equity Accounting'

A method of accounting whereby a corporation will document a portion of the undistributed profits for an affiliated company in which they own a position.

BREAKING DOWN 'Equity Accounting'

The amount of undistributed profits that the corporation decides to document is generally equal to the percentage of equity it controls. In many cases, the profits of the affiliated company are never distributed to the corporation.

  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Accounting

    The systematic and comprehensive recording of financial transactions ...
  3. Affiliated Companies

    Companies that are less than 50% owned by a parent company; the ...
  4. Income Statement

    A financial statement that measures a company's financial performance ...
  5. Encumbrance

    A claim against a property by a party that is not the owner. ...
  6. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and ...
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  1. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  2. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  3. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  4. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  5. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  6. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>

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